Days sales outstanding
(DSO).
A credit measurement ratio calculated by dividing accounts receivable outstanding at the end of time period by the average daily credit sales for the period.
Example 1
Accounts receivable = EUR 50m; and
Daily credit sales = EUR 2m
Then Days sales outstanding
= EUR 50m / EUR 2m
= 25 days.
Based on annual total sales - or total sales for any other period - the calculation is modified appropriately for the length of the time period in days (for example 365 days per year).
Example 2
Annual credit sales = EUR 730m (and accounts receivable = EUR 50m as before):
Days sales outstanding
= EUR 50m /EUR 730m x 365 days
= 25 days (as before).
DSO is also sometimes known as Days billing outstanding (DBO) or Days receivables outstanding (DRO).
